SEPARATION AND DISTRIBUTION AGREEMENT

Exhibit 10.1

SEPARATION AND DISTRIBUTION AGREEMENT

between

AUTOMATIC DATA PROCESSING, INC.

and

BROADRIDGE FINANCIAL SOLUTIONS, LLC

Dated as of March 20, 2007

TABLE OF CONTENTS

 

 

(i)

 

(ii)

 

(iii)

SEPARATION AND DISTRIBUTION AGREEMENT

SEPARATION AND DISTRIBUTION AGREEMENT dated as of March 20, 2007, between Automatic Data Processing, Inc., a Delaware corporation (“ ADP ”), and Broadridge Financial Solutions, LLC, a Delaware limited liability company whose sole member is ADP (each, a “ Party ” and collectively, the “ Parties ”).

RECITALS

WHEREAS, the Board of Directors of ADP has determined that it is in the best interests of ADP to separate the Broadridge Business (as defined below) and the ADP Business (as defined below) into two independent companies (the “ Separation ”), on the terms and subject to the conditions set forth in this Agreement, in order to provide greater flexibility for the management, capital requirements and growth of the Broadridge Business while ensuring that ADP can focus its time and resources on the development of the ADP Business;

WHEREAS, to effect the Separation, Broadridge (as defined below) intends to retain ownership and possession of all Broadridge Assets (as defined below) and ADP intends to retain ownership and possession of all ADP Assets (as defined below);

WHEREAS, to further effect the Separation, Broadridge intends to remain solely liable for all Broadridge Liabilities (as defined below) and ADP intends to remain solely liable for all ADP Liabilities (as defined below);

WHEREAS, to further effect the Separation, and as an integral part thereof, ADP intends to cause the Restructuring (as defined below) to occur prior to the Separation;

WHEREAS, it is the intention of the Parties that, following the Restructuring and the Separation but prior to the Distribution (as defined below), Broadridge will be converted from a Delaware limited liability company into a Delaware corporation pursuant to Section 18-216 of the Delaware Limited Liability Act (the “ LLC Conversion ”), and will be recapitalized such that all of the shares of common stock of Broadridge, par value $0.01 per share (“ Broadridge Common Stock ”), then outstanding will be owned by ADP;

WHEREAS, following the Restructuring, the Separation and the LLC Conversion but prior to the Distribution, Broadridge intends to effect the Broadridge Cash Dividend (as defined below);

WHEREAS, following the Restructuring, the Separation, the LLC Conversion and the Broadridge Cash Dividend, ADP intends to distribute on a pro rata basis to holders of issued and outstanding shares of common stock, par value $0.10 per share, of ADP (“ ADP Common Stock ”), other than shares of ADP Common Stock held in the treasury of ADP, all of the issued and outstanding shares of Broadridge Common

 

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Stock owned by ADP, by means of a dividend of the Broadridge Common Stock to ADP’s stockholders (the “ Distribution ”), on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, it is the intention of the Parties that, for United States federal income tax purposes, (i) the U.S. Restructuring (as defined below) shall qualify as tax-free pursuant to Section 332 of the U.S. Internal Revenue Code of 1986, as amended (the “ Code ”), (ii) the Dutch Restructuring (as defined below) shall qualify as a tax-free split-off pursuant to Sections 368(a)(1)(D) and 355 of the Code, (iii) the Canadian Restructuring (as defined below) shall qualify as a tax-free split-off pursuant to Sections 368(a)(1)(D) and 355 of the Code, (iv) the LLC Conversion and the Distribution shall qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code and (v) this Agreement shall constitute, and is hereby adopted as, a plan of liquidation under Section 332 of the Code and a plan of reorganization under Section 368 of the Code;

WHEREAS, the Board of Directors of ADP has (i) determined that the Restructuring, the Separation, the LLC Conversion, the Broadridge Cash Dividend, the Distribution and the other transactions contemplated by this Agreement and the Ancillary Agreements (as defined below) are in furtherance of and consistent with its business strategy and are in the best interests of ADP and (ii) approved this Agreement and each of the Ancillary Agreements; and

WHEREAS, the Restructuring, the Separation, the LLC Conversion, the Broadridge Cash Dividend, the Distribution and the other transactions contemplated by this Agreement and the Ancillary Agreements (as defined below) shall be consummated in the order and in the manner described on the timeline attached hereto as Annex A ; and

WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Separation, the Broadridge Cash Dividend and the Distribution and certain other agreements that will govern certain matters relating to these transactions and the relationship of ADP and Broadridge and their respective subsidiaries following the Distribution.

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions . As used in this Agreement, the following terms shall have the meanings set forth below:

“ Action ” means any claim, demand, action, cause of action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority.

 

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“ ADP ” has the meaning assigned to such term in the Preamble hereto.

“ ADP Assets ” means all Assets of the ADP Group (including the amount of the Broadridge Cash Dividend after declaration thereof), other than the Broadridge Assets.

“ ADP Business ” means all businesses and operations of the ADP Group, other than the Broadridge Business.

“ ADP Claims ” has the meaning assigned to such term in Section 4.10(a).

“ ADP Common Stock ” has the meaning assigned to such term in the Recitals hereto.

“ ADP Group ” means ADP and each of its Affiliates and Subsidiaries, and any corporation or other entity that may become part of such Group from time to time, other than the Broadridge Group.

“ ADP Indemnified Parties ” has the meaning assigned to such term in Section 4.2.

“ ADP Liabilities ” means those Liabilities of ADP, other than the Broadridge Liabilities.

“ ADP Parties ” has the meaning assigned to such term in Section 4.10(b).

“ ADP Releasors ” has the meaning assigned to such term in Section 4.10(a).

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person; provided , however , that for purposes of this Agreement, no member of either Group shall be deemed to be an Affiliate of any member of the other Group. As used herein, “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

“ Agreement ” means this Agreement, as the same may be modified, amended or supplemented from time to time.

“ Ancillary Agreements ” means the Employee Matters Agreement, the Intellectual Property Transfer Agreement, the Data Center Outsourcing Services Agreement, the Transition Services Agreement and the Tax Allocation Agreement.

 

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“ Asset ” means any right, property or asset, whether real, personal or mixed, tangible or intangible, of any kind, nature and description, whether accrued, contingent or otherwise, and wheresoever situated and whether or not carried or reflected, or required to be carried or reflected, on the books of any Person.

“ Balance Sheet ” has the meaning assigned to such term in the definition of “Broadridge Assets.”

“ Broadridge ” means, prior to the LLC Conversion, Broadridge Financial Solutions, LLC, a Delaware limited liability company whose sole member is ADP and, immediately after the LLC Conversion, Broadridge Financial Solutions, Inc., a Delaware corporation whose sole shareholder is ADP.

“ Broadridge Assets ” means, without duplication:

(i) all of the outstanding shares of all classes of capital stock of (or other equity interests in) Broadridge Subsidiaries owned (either of record or beneficially) by Broadridge or a Broadridge Subsidiary, as of the Effective Time;

(ii) all of the Assets included on the unaudited pro forma combined balance sheet of Broadridge, including the notes thereto, as of December 31, 2006 that is included in the Registration Statement (the “ Balance Sheet ”) to the extent such Assets would have been included as Assets on a consolidated balance sheet of Broadridge, and the notes thereto, as of the Effective Time (were such balance sheet and notes to be prepared) on a basis consistent with the determination of Assets included on the Balance Sheet;

(iii) all other Assets that are of a nature or type that would have resulted in such Assets being included as Assets on a consolidated balance sheet of Broadridge, and the notes thereto, as of the Effective Time (were such balance sheet and notes to be prepared) on a basis consistent with the determination of Assets included on the Balance Sheet;

(iv) the Assets expressly contributed, assigned, transferred, conveyed or delivered to any member of the Broadridge Group pursuant to the Ancillary Agreements;

(v) the contract rights, licenses, Trade Secrets, know-how, and any other rights and Intellectual Property, and any other rights, claims or properties (including any and all rights as an insured party under any ADP insurance policy), in each case of any member of the Broadridge Group and as of the Effective Time; and

(vi) all other Assets that are held by any member of the Broadridge Group as of the Effective Time and that are used or held primarily for use in or necessary to the operation of the Broadridge Business.

“ Broadridge Business ” means the business and operations conducted by the Broadridge Group from time to time, whether prior to, at or after the Effective Time,

 

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including, without duplication, (i) the Brokerage Services and Securities Clearing and Outsourcing Services Businesses conducted by ADP prior to the Restructuring and (ii) the business and operations conducted by the Broadridge Group, as more fully described in the Information Statement.

“ Broadridge Bylaws ” means the Bylaws of Broadridge substantially in the form of Exhibit A hereto.

“ Broadridge Cash Dividend ” means (i) the borrowing under the new credit facility to be entered into by Broadridge as described in the Registration Statement and (ii) the distribution of $690 million of the proceeds of such borrowing as well as approximately $60 million from ADP’s Canadian subsidiaries to ADP in one or more transactions intended to qualify as tax-free pursuant to Section 361(b) of the Code.

“ Broadridge Certificate of Incorporation ” means the Certificate of Incorporation of Broadridge substantially in the form of Exhibit B hereto.

“ Broadridge Claims ” has the meaning assigned to such term in Section 4.10(b).

“ Broadridge Common Stock ” has the meaning assigned to such term in the Recitals hereto.

“ Broadridge Group ” means Broadridge and each of its Subsidiaries and Affiliates and any corporation or other entity that may become part of such Group from time to time.

“ Broadridge Indemnified Parties ” has the meaning assigned to such term in Section 4.3.

“ Broadridge Liabilities ” means, without duplication:

(i) all outstanding Liabilities included on the Balance Sheet, to the extent such Liabilities would have been included on a consolidated balance sheet of Broadridge, and the notes thereto, as of the Effective Time (were such balance sheet and notes to be prepared) on a basis consistent with the determination of Liabilities included on the Balance Sheet;

(ii) all other Liabilities that are of a nature or type that would have resulted in such Liabilities being included as Liabilities on a consolidated balance sheet of Broadridge, and the notes thereto, as of the Effective Time (were such balance sheet and notes to be prepared) on a basis consistent with the determination of Liabilities included on the Balance Sheet;

(iii) all Liabilities expressly assumed by any member of the Broadridge Group pursuant to the Ancillary Agreements; and

 

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(iv) all Liabilities to the extent relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, at or after the Effective Time, in each case to the extent such Liabilities relate to, arise out of or result from any Broadridge Asset or the Broadridge Business.

“ Broadridge Parties ” has the meaning assigned to such term in Section 4.10(a).

“ Broadridge Releasors ” has the meaning assigned to such term in Section 4.10(b).

“ Brokerage Services and Securities Clearing and Outsourcing Services Businesses ” means all of the ADP Brokerage Services’ and Securities Clearing and Outsourcing Services’ business and operations, as more fully described in ADP’s Form 10-K for the fiscal year ended June 30, 2006.

“ Business ” means the Broadridge Business and/or the ADP Business, as the context requires.

“ Canadian Restructuring ” means the transfer of the Brokerage Services and Securities Clearing and Outsourcing Services Businesses conducted, directly or indirectly, by ADP Canada Co., a Canadian corporation, to a new Canadian company that will be transferred to a second Canadian company that will be a subsidiary of Broadridge in a transaction intended to qualify as a tax-free split-off pursuant to Sections 368(a)(1)(D) and 355 of the Code.

“ Code ” has the meaning assigned to such term in the Recitals hereto.

“ Consents ” means any consents, waivers, notices, reports or other filings to be made, or any registrations, licenses, permits, authorizations to be obtained from, or approvals from, or notification requirements to, any third parties, including any Governmental Authority.

“ Continuing ADP Guarantees ” has the meaning assigned to such term in Section 2.3(f)(ii).

“ Data Center Outsourcing Services Agreement ” means the Data Center Outsourcing Services Agreement to be entered into between ADP, Inc. and Broadridge, substantially in the form attached hereto as Exhibit C , with such changes as may be agreed to by the Parties.

“ Delayed Transfer Asset and/or Liability ” has the meaning assigned to such term in Section 2.3(b).

“ Dispute Escalation Notice ” has the meaning assigned to such term in Section 10.8.

 

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“ Distribution ” has the meaning assigned to such term in the Recitals hereto.

“ Distribution Agent ” means American Stock Transfer & Trust Company.

“ Distribution Agent Agreement ” has the meaning assigned to such term in Section 3.1(b).

“ Distribution Date ” means the date on which the Distribution shall be effected, such date to be determined by, or under the authority of, the Board of Directors of ADP in its sole and absolute discretion.

“ Dutch Restructuring ” means the transfer of the Brokerage Services and Securities Clearing and Outsourcing Services Businesses conducted by the subsidiaries of ADP Nederland BV, a Dutch corporation, to a new Dutch company that will be transferred to a second Dutch company that will be a subsidiary of Broadridge in a transaction intended to qualify as a tax-free split-off pursuant to Sections 368(a)(1)(D) and 355 of the Code.

“ Effective Time ” means the time at which the Distribution occurs on the Distribution Date.

“ Employee Matters Agreement ” means the Employee Matters Agreement to be entered into between ADP and Broadridge, substantially in the form of Exhibit D hereto, with such changes as may be agreed to by the Parties.

“ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

“ FIFO Basis ” means, with respect to the payment of Unrelated Claims pursuant to the same ADP insurance policy, the payment in full of each successful claim (regardless of whether ADP or Broadridge is the claimant) in the order in which such successful claim is approved by the insurance carrier, until the limit of the applicable ADP insurance policy is met.

“ Governmental Authority ” means any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, or any other regulatory, self-regulatory, administrative or governmental organization or authority, including the NYSE.

“ Group ” means the ADP Group and/or the Broadridge Group, as the context requires.

“ Indemnified Party ” has the meaning assigned to such term in Section 4.3.

“ Indemnifying Party ” means Broadridge, for any indemnification obligation arising under Section 4.2, and ADP, for any indemnification obligation arising under Section 4.3.

 

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“ Information ” means all information of either the ADP Group or the Broadridge Group, as the context requires, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including non-public financial information, studies, reports, records, books, accountants’ work papers, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other Software (as defined in the definition of “Intellectual Property”), marketing plans, customer data, communications by or to attorneys, memos and other materials prepared by attorneys and accountants or under their direction (including attorney work product), and other technical, financial, legal, employee or business information or data.

“ Information Statement ” means the information statement and any related documentation to be distributed to holders of ADP Common Stock in connection with the Distribution, including any amendments or supplements thereto.

“ Intellectual Property ” means all intellectual property and other similar proprietary rights in any jurisdiction, whether owned or held for use under license, whether registered or unregistered, including such rights in and to: (i) trademarks, trade dress, service marks, certification marks, logos, and trade names, and the goodwill associated with the foregoing (collectively, “ Trademarks ”); (ii) patents and patent applications, and any and all divisions, continuations, continuations-in-part, reissues, continuing patent applications, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention, certificates of registration, design registrations or patents and like rights (collectively, “ Patents ”); inventions, invention disclosures, discoveries and improvements, whether or not patentable; (iii) writings and other works of authorship (“ Copyrights ”); (iv) trade secrets (including, those trade secrets defined in the Uniform Trade Secrets Act and under corresponding foreign statutory Law and common law), Information, business, technical and know-how information, business processes, non-public information, proprietary information and confidential information and rights to limit the use or disclosure thereof by any Person (collectively, “ Trade Secrets ”); (v) software, including data files, source code, object code, application programming interfaces, databases and other software-related specifications and documentation (collectively, “ Software ”); (vi) domain names and uniform resource locators; (vii) moral rights; (viii) privacy and publicity rights; (ix) any and all technical information, Software, specifications, drawings, records, documentation, works of authorship or other creative works, ideas, knowledge, invention disclosures or other data, not including works subject to Copyright, Patent or Trademark protection (“ Technology ”); (x) advertising and promotional materials, whether or not copyrightable; and (xi) claims, causes of action and defenses relating to the enforcement of any of the foregoing; in each case, including any registrations of, applications to register, and renewals and extensions of, any of the foregoing with or by any Governmental Authority in any jurisdiction.

“ Intellectual Property Transfer Agreement ” means the Intellectual Property Transfer Agreement to be entered into between ADP and Broadridge, substantially in the form attached hereto as Exhibit E , with such changes as may be agreed to by the Parties.

 

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“ Inter-Group Indebtedness ” means any intercompany receivables, payables, accounts, advances, loans, guarantees, commitments and indebtedness for borrowed funds between a member of the ADP Group and a member of the Broadridge Group; provided , that “ Inter-Group Indebtedness ” shall not include any contingent Liabilities and accounts payable arising pursuant to the Ancillary Agreements, any agreements with respect to continuing transactions between a member of the ADP Group and a member of the Broadridge Group and any other agreements entered into in the ordinary course of business.

“ Law ” means any applicable foreign, federal, national, state, provincial or local law (including common law), statute, ordinance, rule, regulation, code or other requirement enacted, promulgated, issued or entered into, or act taken, by a Governmental Authority.

“ Liabilities ” means all debts, liabilities, obligations, responsibilities, response actions, Losses, damages (whether compensatory, punitive, consequential, treble or other), fines, penalties and sanctions, absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, on- or off-balance sheet, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including those arising under or in connection with any Law, or other pronouncements of Governmental Authorities constituting an Action, order or consent decree of any Governmental Authority or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or a Party, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys’ fees, disbursements and expense of counsel, expert and consulting fees, fees of third party administrators, and costs related thereto or to the investigation or defense thereof.

“ LLC Conversion ” has the meaning assigned to such term in the Recitals hereto.

“ Loss ” means any claim, demand, complaint, damages, loss, liability, cost or expense arising out of, relating to or in connection with any Action.

“ Mixed Account ” has the meaning assigned to such term in Section 2.3(g)(ii).

“ Mixed Contract ” has the meaning assigned to such term in Section 2.3(g)(i).

“ NYSE ” means the New York Stock Exchange, Inc.

“ Parties ” has the meaning assigned to such term in the Preamble hereto.

 

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“ Person ” means any natural person, corporation, general or limited partnership, limited liability company or partnership, joint stock company, joint venture, association, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

“ Pre-Distribution Transactions ” means, collectively, the Restructuring, the Separation, the LLC Conversion, the Recapitalization and the Broadridge Cash Dividend.

“ Recapitalization ” has the meaning assigned to such term in Section 2.1(c).

“ Record Date ” means the date to be determined by the Board of Directors of ADP as the record date for determining stockholders of ADP entitled to receive shares of Broadridge Common Stock pursuant to the Distribution.

“ Registration Statement ” means the Registration Statement on Form 10 of Broadridge relating to the registration under the Exchange Act of Broadridge Common Stock, including any amendments or supplements thereto.

“ Reimbursing Party ” has the meaning assigned to such term in Section 10.2.

“ Related Claims ” means a claim or claims against an ADP insurance policy made by each of ADP and/or its insured parties, on the one hand, or Broadridge and/or its insured parties, on the other hand, filed in connection with Losses suffered by each of ADP and Broadridge arising out of the same underlying transaction, transactions, event or events.

“ Restructuring ” means, collectively, the Dutch Restructuring, the U.S. Restructuring, the Canadian Restructuring, the Swiss Restructuring and the U.S. Contribution.

“ SEC ” means the United States Securities and Exchange Commission.

“ Separation ” has the meaning assigned to such term in the Recitals hereto.

“ Shared Person ” has the meaning assigned to such term in Section 2.3(i).

“ SOX ” means the Sarbanes-Oxley Act of 2002, as amended from time to time.

“ Subsidiary ” means, with respect to any Person, any other Person of which a Person (either alone or through or together with any other Subsidiary of such Person) owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

 

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“ Swiss Restructuring ” means the transfer of the Brokerage Services and Securities Clearing and Outsourcing Services Businesses conducted by ADP Suisse S.A., a Swiss company, to a new Swiss company that will be transferred to Broadridge.

“ Tax Allocation Agreement ” means the Tax Allocation Agreement to be entered into between ADP and Broadridge, substantially in the form attached hereto as Exhibit F , with such changes as may be agreed to by the Parties.

“ Third Party Claim ” has the meaning assigned to such term in Section 4.5(a).

“ Transaction Expenses ” has the meaning assigned to such term in Section 10.2.

“ Transition Services Agreement ” means the Transition Services Agreement to be entered into between ADP and Broadridge, substantially in the form attached hereto as Exhibit G , with such changes as may be agreed to by the Parties.

“ Unrelated Claims ” means a claim or claims against an ADP insurance policy made by each of ADP and/or its insured parties, on the one hand, or Broadridge and/or its insured parties, on the other hand, filed in connection with Losses suffered by each of ADP and Broadridge arising out of unrelated and separate transactions or events.

“ U.S. Contribution ” means the contribution by ADP to Broadridge of Financial Information Services (Japan) Limited and the U.S. Subsidiaries that will have been subsidiaries of ADP Atlantic, Inc., a Delaware corporation (“ ADP Atlantic ”), immediately prior to the U.S. Restructuring and that conduct the Brokerage Services and Securities Clearing and Outsourcing Services Businesses.

“ U.S. Restructuring ” means the transfer by ADP Atlantic, to ADP of the U.S. Subsidiaries of ADP Atlantic that conduct the Brokerage Services and Securities Clearing and Outsourcing Services Businesses, in a transaction intended to qualify as tax-free pursuant to Section 332 of the Code.

Section 1.2 General Interpretive Principles . (a) Words in the singular shall include the plural and vice versa, and words of one gender shall include the other gender, in each case, as the context requires, (b) the words “ hereof ,” “ herein ,” “ hereunder ,” and “ herewith ” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement and not to any particular provision of this Agreement, and references to Article, Section, paragraph, exhibit and schedule are references to the Articles, Sections, paragraphs, exhibits and schedules to this Agreement unless otherwise specified, (c) the word “ including ” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified and (d) any reference to any federal, state, local or non-U.S. statute or Law shall be deemed to also refer to all rules and regulations promulgated thereunder, unless the context otherwise requires.

 

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ARTICLE II

THE PRE-DISTRIBUTION TRANSACTIONS

Section 2.1 Restructuring, Recapitalization and Other Transactions . On or prior to the Distribution Date (but prior to the Broadridge Cash Dividend and the Distribution), and subject to satisfaction or waiver of the conditions set forth in Section 2.4:

(a) the Parties shall effect the Restructuring;

(b) following the Restructuring, the Parties shall effect the LLC Conversion; and

(c) following the LLC Conversion, the Broadridge Common Stock shall be recapitalized (the “ Recapitalization ”) such that the number of shares of Broadridge Common Stock issued and outstanding and owned by ADP immediately prior to the Effective Time shall be in an amount calculated on the basis of the following: one (1) share of Broadridge Common Stock with respect to every four (4) shares of ADP Common Stock issued and outstanding immediately prior to the Distribution; and such Broadridge Common Stock owned by ADP will constitute all of the issued and outstanding capital stock of Broadridge.

Section 2.2 Broadridge Cash Dividend . On or prior to the Distribution Date (but prior to the Distribution) and subject to the satisfaction or waiver of the conditions set forth in Sections 2.1 and 2.4, Broadridge shall effect the Broadridge Cash Dividend.

Section 2.3 The Separation and Related Transactions .

(a)    (i) The Parties acknowledge that the Separation, subject to the terms and conditions hereof and of the Ancillary Agreements, will result in (A) Broadridge directly or indirectly operating the Broadridge Group and the Broadridge Business, owning all of the Broadridge Assets and being liable for all of the Broadridge Liabilities and (B) ADP directly or indirectly operating the ADP Group and the ADP Business, owning all of the ADP Assets and being liable for all of the ADP Liabilities.

(ii) Pursuant to the Separation, Broadridge, or one or more members of the Broadridge Group, shall remain and be the sole owner, and shall have exclusive right, title and interest in and to, all Broadridge Assets. Concurrently therewith, Broadridge shall remain solely liable for and shall faithfully perform, fulfill and discharge fully in due course all of the Broadridge Liabilities in accordance with their respective terms. Pursuant to the Separation, ADP, or one or more members of the ADP Group, shall remain the sole owner, and shall have exclusive right, title and interest in and to, all ADP Assets. Concurrently therewith, ADP shall remain and be solely liable for and shall faithfully perform, fulfill and discharge fully in due course all of the ADP Liabilities in accordance with their respective terms. From and after the Effective Time,

 

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Broadridge or one or more members of the Broadridge Group shall be solely responsible for all Broadridge Liabilities and ADP or one or more members of the ADP Group shall be solely responsible for all ADP Liabilities, regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to, on or subsequent to the Distribution Date, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by ADP’s or Broadridge’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the ADP Group or the Broadridge Group, as the case may be) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the ADP Group or the Broadridge Group or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates, as the case may be. Notwithstanding anything herein to the contrary, this Section 2.3(a)(ii) shall not apply to any Assets or Liabilities contributed, assigned, transferred, conveyed, delivered and/or assumed under any Ancillary Agreement, which shall be governed by the terms thereof.

(iii) Subject to any Ancillary Agreement and to the extent that prior to the Effective Time, (A) any member of the ADP Group owns or is in possession of any Broadridge Asset or any member of the Broadridge Group owns or is in possession of any ADP Asset or (B) any member of the ADP Group is liable to any third party for any Broadridge Liability or any member of the Broadridge Group is liable to any third party for any ADP Liability, ADP and Broadridge shall, and shall cause the respective members of their Groups to, cooperate and use their respective commercially reasonable efforts to obtain the necessary Consents to, and shall, contribute, assign, transfer, convey and/or deliver any ADP Asset or Broadridge Asset, as the case may be, and/or assume any ADP Liability or Broadridge Liability, as the case may be, such that, on or prior to the Effective Time, Broadridge or a member of the Broadridge Group owns and is in possession of the Broadridge Assets and is solely liable for the Broadridge Liabilities and ADP or a member of the ADP Group owns and is in possession of the ADP Assets and is solely liable for the ADP Liabilities.

(b) Delayed Transfer of Assets and/or Liabilities . To the extent that any contribution, assignment, transfer, conveyance, delivery or assumption required pursuant to Section 2.3 shall not have been consummated as of the Effective Time, whether by its terms or by operation of Law (any such Asset and/or Liability, a “ Delayed Transfer Asset and/or Liability ”) and subject to any Ancillary Agreement: (i) ADP and Broadridge thereafter shall, and shall cause the members of their respective Groups to, use commercially reasonable efforts and cooperate to effect such contribution, assignment, transfer, conveyance, delivery or assumption as promptly following the Effective Time as shall be practicable; (ii) ADP shall thereafter, with respect to any such Broadridge Asset, use commercially reasonable efforts, with the costs of ADP related thereto to be promptly reimbursed by Broadridge, hold, or cause a member of the ADP Group to hold, such Broadridge Asset in trust for the use and benefit of Broadridge and, with respect to any such Broadridge Liability, retain such Broadridge Liability for the account of Broadridge; and (iii) Broadridge shall thereafter, with respect to any such ADP Asset, use commercially reasonable efforts, with the costs of

 

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Broadridge related thereto to be promptly reimbursed by ADP, hold, or cause a member of the ADP Group to hold, such ADP Asset in trust for the use and benefit of ADP and, with respect to any such ADP Liability, to retain such ADP Liability for the account of ADP, in each case in order to place each Party, insofar as is reasonably possible, in the same position as would have existed had such Delayed Transfer Asset and/or Liability been contributed, assigned, transferred, conveyed, delivered or assumed as contemplated hereby (it being understood that neither ADP (with respect to any Broadridge Asset or Broadridge Liability) nor Broadridge (with respect to any ADP Asset or ADP Liability) shall be required to take any action pursuant to this clause that would, or could reasonably be expected to, result in any financial obligation to it or any restriction on its business or operations, except as may be required in any Ancillary Agreement. To the extent that Broadridge is provided the use or benefit of any Broadridge Asset or has any Broadridge Liability held for its account pursuant to this Section 2.3(b), Broadridge or another member of the Broadridge Group shall perform, for the benefit of ADP and any third Person, the obligations of ADP thereunder or in connection therewith, or as may be directed by ADP and if Broadridge or another member of the Broadridge Group shall fail to perform to the extent required herein, Broadridge shall hold ADP harmless and indemnify ADP therefor. To the extent that ADP or another member of the ADP Group is provided the use or benefit of any ADP Asset or has any ADP Liability held for its account pursuant to this Section 2.3(b), ADP or another member of the ADP Group shall perform, for the benefit of Broadridge and any third Person, the obligations of Broadridge thereunder or in connection therewith, or as may be directed by Broadridge and if ADP or another member of the ADP Group shall fail to perform to the extent required herein, ADP shall hold Broadridge harmless and indemnify Broadridge therefor. Each Party shall, and/or shall cause members of its Group to, as and when any such Delayed Transfer Asset and/or Liability becomes contributable, assignable, transferable, conveyable, deliverable or assumable by such Party, effect such contribution, assignment, transfer, conveyance, delivery or assumption, as applicable, as promptly as practicable thereafter. Each of ADP and Broadridge shall, and shall cause the members of its respective Group to, (i) treat for all income tax purposes (A) the Delayed Transfer Assets as assets owned by the Person entitled to such Delayed Transfer Assets as of the Effective Time and (B) the Delayed Transfer Liabilities as liabilities of, or owed by, the Person intended to be subject to such Delayed Transfer Liabilities as of the Effective Time and (ii) neither report nor take any income tax position (on a tax return or otherwise) inconsistent with such treatment (unless required by a change in applicable law or a good faith resolution of a tax contest relating to income taxes).

(c) Assignment of Certain Agreements . Subject to the Ancillary Agreements and to Section 2.3(g) hereof, (i) ADP shall assign to Broadridge all of its right, title and interest under the agreements comprising Broadridge Assets, as set forth on Schedule 2.3(c)(i) attached hereto, and (ii) Broadridge shall assign to ADP all of its right, title and interest under the agreements comprising ADP Assets, as set forth on Schedule 2.3(c)(ii) attached hereto, and each Party shall execute and deliver any and all instruments of substitution and such other instruments or agreements as shall be necessary in connection with the discharge of the other Party from its respective obligations with respect to such agreements.

 

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(d) Termination of Certain Agreements . Subject to Section 2.3(e), all contracts, licenses, agreements, commitments or other arrangements, formal or informal, between any member of the ADP Group, on the one hand, (i) and any member of the Broadridge Group, on the other hand, or (ii) guarantying any obligation of any member of the Broadridge Group, on the other hand, in each case in existence on or prior to the Distribution Date, shall be automatically settled, cancelled, assigned, assumed or terminated by the Parties at the Effective Time, except (i) for (A) such agreements specifically set forth on Schedule 2.3(d) attached hereto, (B) this Agreement and (C) each Ancillary Agreement (including each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the Parties or any of the members of their respective Groups), (ii) for any contracts, licenses, agreements, commitments or other arrangements to which any Person is a party in addition to either Party or any member of either Group, or (iii) as otherwise agreed to in good faith by the Parties in writing on or after the date hereof. Except as expressly provided in Section 2.3(e), from and after the Distribution Date, no member of either Group shall have any rights or obligations under any such settled, cancelled, assigned, assumed or terminated contract, license, agreement, commitment or arrangement with any member of the other Group.

(e) Settlement of Inter-Group Indebtedness . Except with respect to the agreements specifically set forth on Schedule 2.3(d) , the Parties shall use their commercially reasonable efforts to settle all amounts payable in connection with any Inter-Group Indebtedness on or prior to the Distribution Date.

(f) Guaranteed Obligations .

(i) ADP and Broadridge shall cooperate, and shall cause their respective Groups to cooperate, to terminate, or to cause a member of the ADP Group to be substituted in all respects for any member of the Broadridge Group in respect of, all obligations of such member of the Broadridge Group under any ADP Liability for which such member of the Broadridge Group may be liable, as guarantor, original tenant, primary obligor or otherwise. If such termination or substitution is not effected by the Distribution Date, (A) ADP shall indemnify and hold harmless the relevant Broadridge Indemnified Party for any Liability arising from or relating thereto and (B) without the prior written consent of Broadridge, from and after the Distribution Date, ADP shall not, and shall not permit any member of the ADP Group or any of its Affiliates to, amend, renew or extend the term of, increase its obligations under, or transfer to a third Person, any loan, lease, contract or other obligation for which any member of the Broadridge Group is or may be liable, unless all obligations of the Broadridge Group with respect thereto are thereupon terminated by documentation reasonably satisfactory in form and substance to Broadridge.

(ii) ADP and Broadridge shall cooperate, and shall cause their respective Groups to cooperate, to terminate, or to cause a member of the Broadridge Group to be substituted in all respects for any member of the ADP Group in respect of, all obligations of such member of the ADP Group under any Broadridge Liability for which such member of the ADP Group may be liable, as guarantor, original

 

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tenant, primary obligor or otherwise, other than those guarantees listed on Schedule 2.3(d) (the “ Continuing ADP Guarantees ”). If such termination or substitution is not effected by the Distribution Date, (A) Broadridge shall indemnify and hold harmless the relevant ADP Indemnified Party for any Liability arising from or relating thereto (including with respect to any Continuing ADP Guarantees), (B) without the prior written consent of ADP, from and after the Distribution Date, Broadridge shall not, and shall not permit any member of the Broadridge Group to, amend, renew or extend the term of, increase its obligations under, or transfer to a third Person, any loan, lease, contract or other obligation for which any member of the ADP Group is or may be liable (including any Continuing ADP Guarantee or any loan, lease, contract or other obligation underlying any Continuing ADP Guarantee), unless all obligations of the ADP Group with respect thereto are thereupon terminated by documentation reasonably satisfactory in form and substance to ADP and (C) with respect to each Continuing ADP Guarantee, for the period commencing on the Distribution Date through the date that such Continuing ADP Guarantee has terminated, the member of the Broadridge Group that is a party to the underlying loan, lease, contract or other obligation relating to such Continuing ADP Guarantee shall pay a guarantee fee to ADP in the amounts specified on Schedule 2.3(f) .

(g) Mixed Contracts; Mixed Accounts .

(i) Subject to the Ancillary Agreements, and unless the Parties agree otherwise, any agreement to which any member of the ADP Group or the Broadridge Group is a party prior to the Effective Time that inures to the benefit or burden of both of the ADP Business and the Broadridge Business (a “ Mixed Contract ”) shall be assigned in part to Broadridge or one of its Subsidiaries, and/or to ADP or one of its Subsidiaries, as the case may be, if so assignable, prior to or as of the Effective Time, such that each Party or its respective Subsidiaries shall be entitled to the rights and benefits thereof and shall assume the related portion of any obligations thereunder and any Liabilities inuring to their respective Businesses; provided , however , that in no event shall either Party be required to assign any Mixed Contract in its entirety. If any Mixed Contract cannot be so partially assigned, ADP and Broadridge shall, and shall cause each of their respective Subsidiaries to, take such other reasonable and permissible actions to cause: (A) the Assets associated with that portion of each Mixed Contract that relates to the Broadridge Business to be enjoyed by Broadridge or a Broadridge Subsidiary; (B) the Liabilities associated with that portion of each Mixed Contract that relates to the Broadridge Business to be borne by Broadridge or a Broadridge Subsidiary; (C) the Assets associated with that portion of each Mixed Contract that relates to the ADP Business to be enjoyed by ADP or an ADP Subsidiary; and (D) the Liabilities associated with that portion of each Mixed Contract that relates to the ADP Business to be borne by ADP or an ADP Subsidiary; provided , however , that the arrangements described in clauses (A), (B), (C) and (D) shall terminate on the earlier to occur of (1) the termination of the applicable Mixed Contract and (2) the first anniversary of the Distribution Date.

(ii) Except as may otherwise be agreed by the Parties, neither Party shall seek to assign any accounts receivable or accounts payable relating to both the ADP Business and the Broadridge Business (“ Mixed Accounts ”). ADP and

 

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Broadridge shall, and shall cause each of their respective Subsidiaries to, take such other reasonable and permissible actions to cause: (A) the Assets associated with that portion of each Mixed Account that relates to the ADP Business to be enjoyed solely by ADP or an ADP Subsidiary; (B) the Liabilities associated with that portion of each Mixed Account that relates to the ADP Business to be borne solely by ADP or an ADP Subsidiary; (C) the Assets associated with that portion of each Mixed Account that relates to the Broadridge Business to be enjoyed solely by Broadridge or a Broadridge Subsidiary; and (D) the Liabilities associated with that portion of each Mixed Account that relates to the Broadridge Business to be borne solely by Broadridge or a Broadridge Subsidiary; provided , however , that the arrangements described in clauses (A), (B), (C) and (D) shall terminate no later than the first anniversary of the Distribution Date.

(iii) Nothing in this Section 2.3(g) shall require any member of either Group to make any payment, incur any obligation or grant any concession to any third party in order to effect any transaction contemplated by this Section 2.3(g).

(h) Advance Pricing Agreement .

(i) ADP Canada shall transfer to a Canadian Affiliate of Broadridge (“ New CanCo 2 ”), and New CanCo 2 shall assume the liability for, a portion (subject to adjustment) of the payables owing under the APA (defined below) such that the amount of the payables owing under the APA by New CanCo 2 and ICC (defined below) is $70 million, and a U.S. Affiliate of Broadridge shall retain, or acquire from a U.S. Affiliate of ADP, $70 million of the receivables owed under the APA.

(ii) If it is finally determined under the APA that the aggregate amount of receivables owing under the APA is greater than $120 million (such difference the “ APA excess ”), then one or more U.S. Affiliates of ADP shall be deemed to have contributed to one or more U.S. Affiliates of Broadridge, prior to the Separation, receivables owing under the APA such that the total amount of the receivables owing to U.S. Affiliates of Broadridge under the APA equals: the amount of the APA liability assumed by New CanCo 2 (as adjusted), plus the amount of the liability under the APA payable by ICC, less the amount of any payment owing to New CanCo 2 by ADP Canada in respect of the Canadian income tax consequences of the payment of the APA excess (which payment New CanCo 2 has directed ADP Canada to make to ADP).

(iii) If it is finally determined under the APA that the aggregate amount of receivables owing under the APA is less than $120 million (such difference the “ APA deficit ”), then one or more U.S. Affiliates of Broadridge shall be deemed to have distributed to one or more U.S. Affiliates of ADP, prior to the Separation, receivables owing under the APA such that the total amount of the receivables owing to U.S. Affiliates of Broadridge under the APA equals